The ECB said on Thursday it was increasing the overall size of its Pandemic Emergency Purchase Programme (PEPP) by 500 billion...
Jul 31, 2020
Chart of the Day: AUD/USD
With the Dollar Index trading below key support at 93.41, there is the expectation of testing the swing low made on 03/09/2017 at 91.28. With the U.S. Federal reserve announcing on Wednesday that interest rates were to remain unchanged at 0.25% and would essentially take whatever measures necessary to shore up the economy, this would effectively mean continued money printing thereby devaluing the U.S. Dollar which in turn has led other currencies to appreciate in value with the Euro briefly achieving the 1.19, levels not seen since 13.05.2018 whilst the British Pound reaching a high of 1.31444, levels achieved in 08/03/2020. Commodities prices have performed exceptionally in the month of July, with Gold and Silver benefiting from a weakened U.S. Dollar. The Australian Dollar briefly reached a high of 0.7227. Data from ING suggest that the Australian Dollar could achieve 0.73 by 2021 (Q1), whilst HSBC forecast 0.72 by 2021 (Q1). This therefore implies that the Australian Dollar is well in advance of analyst expectation as it benefits from the strength in commodity prices, weakness in the U.S. Dollar and not necessarily due to improving economic conditions in Australia. From a technical perspective, price is at the psychological 0.72 level and the 200 weekly simple and exponential moving averages are sitting just above. Whenever price has tested these moving averages in the past such as on the 23/07/2017, 03/09/2017 and 21/01/2018, prices has rejected those levels and moved down significantly. Hence, there is the possibility that this could re-occur however, it will depend on the U.S. Dollar strengthening, clarity on the U.S. elections, investors diverting capital from safe haven assets and a breakthrough in the coronavirus pandemic.